Benefits Denial Against Corporate Naysayer
Upheld

January 31, 2003 (PLANSPONSOR.com) - A federal
appeals court has upheld a decision by the administrator of
an employer severance plan for turning down benefits to a
fired employee who had criticized the company.

The US 2
nd
Circuit Court of Appeals rejected the contention by
plaintiff Marie Kirk that the administrator of the Readers
Digest Association severance plan was guilty of a conflict
of interest because the administrator was also the
company’s vice president of human resources,
Washington-based legal publisher BNA reported.

There was no evidence that the alleged conflict of
interest had actually impacted the administrator’s
decision, the judges ruled. In addition, the court said it
was not arbitrary and capricious for the administrator to
give greater credibility to witnesses who heard Marie
Kirk’s disparaging remarks than to her own testimony.

According to the BNA report, Readers Digest fired Kirk
in November 1999. She was told that she would get severance
benefits if she signed a waiver that provided, among other
things, that she would be denied benefits if she “‘acted in
a matter detrimental to the best interests of RDA including
… disparaging RDA [or] its employees.'”

Three days after being fired, Kirk was told she would
not get benefits because the company had discovered that
she had made disparaging remarks about the company to an
incoming employee. Kirk appealed the decision to the
company’s vice-president of human resources. The
vice-president determined that Kirk had in fact made the
comments.

Kirk sued the plan and the administrator alleging an
ERISA violation. A federal judge in the US District Court
for the Southern District of New York upheld the
administrator’s decision and dismissed Kirk’s lawsuit. The
case is Kirk v. Readers Digest Association Inc. Severance
Plan, 2d Cir., No. 02-7077, unpublished 1/29/03.